Social and symptom management skills training approaches are widely available for use in the care of individuals with schizophrenia. Controlled studies have demonstrated efficacy, but questions persist regarding generalizability and overall effectiveness of skills training in outpatient settings. It is important to establish whether there are subgroups of individuals who are more likely to benefit from intensive rehabilitation efforts, so that treatments can be appropriately matched and rehabilitation efforts made more efficient. Preliminary studies by our group and others suggest that individuals with good verbal memory capacity are more likely to acquire new skills and use them in real world settings. However, there are no prospective studies of skills training for outpatients with schizophrenia that control for the effects of neurocognitive deficits. Also, there are no studies of the effectiveness of skills training for individuals taking atypical antipsychotic medications. This is important in that atypical antipsychotics are now first-line treatments for schizophrenia, and also because these agents may improve verbal memory function in a way that increases the chances of good rehabilitation outcomes. This study tests the effectiveness of a standard skills training approach and the mediating effects of verbal memory deficits in a cohort of outpatients with chronic psychotic disorders taking atypical antipsychotic medications. Subjects taking stable doses of risperidone, olanzapine, or quetiapine will receive either intensive symptom management and social skills training or a comparison group therapy for 12 months. Medication assignment will not be controlled, but separate randomization streams will be used for subjects taking each of the atypical agents. In addition, a stratified randomization procedure will be used to control for good vs. poor neurocognitive functioning using identified cutoff values on a verbal memory test. The primary aims of the study are to: a) document the degree of skill acquisition seen following training; b) identify the degree of generalization of learned skills to other settings; and c) document the mediating effects of neurocognitive deficits on treatment response and functional capacity. This study will generate new information that can guide treatment planning and maximize the chances for recovery in individuals with schizophrenia.